{"id":4503,"date":"2026-07-29T21:16:27","date_gmt":"2026-07-29T21:16:27","guid":{"rendered":"https:\/\/crosscountrymovingteams.com\/?p=4503"},"modified":"2026-07-29T21:16:27","modified_gmt":"2026-07-29T21:16:27","slug":"inside-chinas-two-speed-economy-why-goods-consumption-is-slumping-even-as-exports-and-services-boom","status":"publish","type":"post","link":"https:\/\/crosscountrymovingteams.com\/?p=4503","title":{"rendered":"Inside China\u2019s two-speed economy: Why goods consumption is slumping even as exports and services boom"},"content":{"rendered":"<div>\n<p>The world\u2019s second-largest economy looks like it\u2019s running at two speeds: An export-focused manufacturing sector that\u2019s feeding global hunger for electronics and semiconductors, and a weaker domestic economy beset by sluggish sales, a property sector bust, and \u201cinvolution,\u201d China\u2019s term for fierce, margin-suppressing competition.<\/p>\n<p>Read more <a href=\"https:\/\/crosscountrymovingteams.com\/?p=4501\">Fauci accuses Rand Paul of \u2018unhinged obsession,\u2019 pleads Fifth at least 100 times on Covid origins despite full Biden pardon<\/a><\/p>\n<p>\u201cThere\u2019s remarkable resilience and bright spots in manufacturing and exports, and softness in consumption and fixed asset investment,\u201d said Carol Liao, Greater China chair for Boston Consulting Group. \u201cThat\u2019s been the pattern for a while now, since 2025.\u201d<\/p>\n<div>\n<div>\n<div><\/div>\n<\/div>\n<\/div>\n<p>The pandemic marks a clean before-and-after in Chinese consumer behavior. Before COVID, consumption growth consistently outpaced GDP growth; since the pandemic, the reverse has held true, Liao said.\u00a0<\/p>\n<p>The most obvious culprit is the property market: falling home values have eroded household net worth for a population that holds the bulk of its wealth in real estate, discouraging spending. \u201cThis is about the willingness to spend, not ability,\u201d William Bratton, head of cash equity research, APAC at BNP Paribas wrote in a July 22 note.\u00a0<\/p>\n<p>Chinese officials remain allergic to direct cash transfers, with President Xi Jinping warning against both \u201cwelfarism\u201d and \u201cfeeding lazy people.\u201d<\/p>\n<p>\u201cChina normally doesn\u2019t give free handouts,\u201d Liao said. Instead, Beijing prefers to \u201cinvest in people,\u201d channeling money into human capital\u2014like early-education subsidies, elderly care, and social safety-net spending\u2014rather than checks to households.<\/p>\n<div>\n<div><\/div>\n<\/div>\n<p>On July 13, China unveiled its first-ever standalone five-year plan for consumption, part of the broader 15th Five-Year Plan. \u201cBy 2030, the overall scale of the consumer market will continue to expand, the household consumption rate will rise markedly\u2026and consumption\u2019s role in driving economic growth will be further strengthened,\u201d China\u2019s State Council said.<\/p>\n<p>The plan targets 60 trillion yuan, or almost $9 trillion, in annual retail sales by 2030. Yet Beijing\u2019s ambitions are still modest: Hitting that target will need annual consumption growth of 3.7% over the next five years, well below the 5.0% pace recorded in the first half of the decade.\u00a0<\/p>\n<div>\n<div>\n<div><\/div>\n<\/div>\n<\/div>\n<p>\u201cIt\u2019s small steps, but it\u2019s moving in the right direction,\u201d Liao said. \u201cPolicymakers are very good at the supply side of things; they\u2019re not so good at the demand side.\u201d<\/p>\n<div>\n<div><\/div>\n<\/div>\n<p>There\u2019s even a two-speed economy within China\u2019s consumption numbers. Goods consumption is weak, while services consumption is outperforming, running above headline GDP growth, Liao said.<\/p>\n<div>\n<div><\/div>\n<\/div>\n<div>\n<div><\/div>\n<\/div>\n<p>Cars have been a huge drag on China\u2019s consumption numbers. Chinese automakers sold 1.6 million cars last month, a 23.2% drop from the same period a year earlier. The Chinese Passenger Car Association now predicts that total car sales will drop by 14% this year, to 20.4 million. (Here, too, exports are proving to be a bright spot: The country exported 1.1 million cars last year, a 70% year-over-year jump).<\/p>\n<p>Two forces are compounding the slump, Liao said. The consumption subsidies that once nudged buyers toward electric vehicles and plug-in hybrids are \u201cfading off a bit\u201d after roughly two years in place. At the same time, \u201ccut-throat competition\u201d among domestic automakers has crushed margins across the industry and, perversely, discouraged some buyers from purchasing at all, as they wait for prices to fall further.<\/p>\n<p>Yet the pullback isn\u2019t universal. Basic necessities\u2014dairy, rice, staples where supply is abundant and quality reliable\u2014have become a hunt for the best price. \u201cFor things like dairy products and rice\u2014basic daily necessities where supply is ample and the quality is pretty good\u2014shoppers are looking for a bargain,\u201d Liao said.\u00a0<\/p>\n<p>Discretionary \u201clifestyle\u201d spending, by contrast, is holding up: Pop Mart\u2019s Labubu dolls, pet care, and outdoor recreation are all categories where Chinese consumers are still willing to pay up. \u201cThis stuff adds color to people\u2019s lives,\u201d she said.<\/p>\n<div>\n<div>\n<div><\/div>\n<\/div>\n<\/div>\n<div>\n<div><\/div>\n<\/div>\n<p>(Data collected by Zhaopin, a jobs platform, in March reported that \u201cpet services\u201d had the second-highest growth in hiring, after \u201crobotics.\u201d)\u00a0<\/p>\n<p>\u201cLooking ahead, we expect funding support should continue to shift towards services consumption, which still offers significant untapped potential in China,\u201d HSBC China economists Erin Xin and Taylor Wang wrote in a July 15 note.\u00a0<\/p>\n<p>Liao expects to see \u201cstabilization or growth\u201d in China\u2019s economy in the second half of the year, thanks primarily to exports.\u00a0<\/p>\n<p>The export boom looks different than in previous cycles, she argued. \u201cIt\u2019s not the traditional, low-value-added stuff,\u201d she says. \u201cIt\u2019s advanced manufacturing, related to the AI investment boom.\u201d<\/p>\n<p>Read more <a href=\"https:\/\/crosscountrymovingteams.com\/?p=4499\">Scientist on wildfires: \u2018we have our foot on the gas pedal\u2019 but \u2018we\u2019ve lost the brakes\u2019<\/a><\/p>\n<div>\n<div><\/div>\n<\/div>\n<p>China doesn\u2019t produce the most advanced chips used in AI processors from companies like Nvidia, but it dominates production of older-generation chips that go into phones, PCs, game consoles, and other consumer electronics; these are now in short supply as data-center construction consumes capacity that would otherwise serve consumer electronics makers.<\/p>\n<p>The country\u2019s chip manufacturers reported a staggering 2579% jump in profit for the first half of the year, according to data from the National Bureau of Statistics released on July 27.<\/p>\n<div>\n<div>\n<div><\/div>\n<\/div>\n<\/div>\n<p>Apple is even lobbying the Trump administration for approval to buy memory chips from CXMT, a Chinese manufacturer that\u2019s currently the world\u2019s fourth-largest producer of dynamic random-access memory. Specifically, Apple reportedly wants guarantees that Washington won\u2019t add CXMT to its Entity List, which would impose licensing requirements on working with the company.\u00a0<\/p>\n<p>CXMT shares started trading on Shanghai\u2019s STAR market on July 27, following a $9.8 billion IPO. Shares rose 470% on their first day, making the chipmaker the most valuable company listed in mainland China.\u00a0<\/p>\n<div>\n<div><\/div>\n<\/div>\n<p>Liao invokes a metaphor now common among both Chinese officials and consultants: China\u2019s domestic market as a \u201cfitness center\u201d\u2014a phrase popularized by China\u2019s No. 2 official, Premier Li Qiang, and echoed by figures like McKinsey Greater China chair Joe Ngai. \u201cYou really have the toughest exercise scheme in this market,\u201d Liao said.<\/p>\n<p>The competition is partly a creature of industrial policy. \u201cWhen policymakers say that some industries will be priorities, local governments then encourage local champions to go into the market,\u201d Liao said. This dynamic that has produced a glut of companies in favored sectors like green technology, electric vehicles, and semiconductors, chasing far more customers than the market, domestic or global, can support. \u201cUnfortunately, people just need to fight it out,\u201d she says.<\/p>\n<p>Foreign companies have been struggling in China\u2019s \u201cgym.\u201d Companies like Nike, Starbucks and General Motors have seen their sales plummet in China, as domestic consumers instead turn to high-quality and affordable local competitors.<\/p>\n<p>However, Liao cautioned against seeing reading this as a sudden reversal. \u201cForeign brands have been losing share in China for about a decade,\u201d she said. Nor is every foreign company struggling: Both Adidas and Lululemon have successfully grown their sales in China.\u00a0<\/p>\n<div>\n<div>\n<div><\/div>\n<\/div>\n<\/div>\n<p>\u201cA lot of the big multinational brands are known, but they\u2019re not necessarily loved,\u201d Liao says. \u201cIn today\u2019s market, you have to be 100% suitable for 5% of the population\u2014not 60% for 80% of the population.\u201d<\/p>\n<p>The companies that do succeed, Liao says, win by targeting a narrow niche with precision. She points to an unnamed instant-coffee brand that built its business almost entirely on Douyin, ByteDance\u2019s domestic version of TikTok, by anchoring its marketing to two specific consumption moments: first thing in the morning, or right before a gym session. \u201cYou take it either at the beginning of the morning or before you go to the gym, and all their Douyin communications are focused on that specific occasion and that specific benefit,\u201d she says.<\/p>\n<p>In many ways, China\u2019s AI push mirrors the \u201cfitness center\u201d dynamic Liao describes: a crowded, high-intensity environment where adaptability can matter more than size. Companies are not just racing to build the most powerful models\u2013even though the title of China\u2019s most capable model seems to change every six weeks\u2014but to prove they can survive relentless competition while turning those models into viable businesses.<\/p>\n<p>Liao spoke with <em>Fortune <\/em>hours after Moonshot AI released the newest version of its Kimi large language model, a system whose performance approaches offerings from OpenAI and Anthropic at a markedly lower price.\u00a0<\/p>\n<div>\n<div><\/div>\n<\/div>\n<p>\u201cChina and the U.S. take quite different approaches to AI,\u201d Liao says. \u201cThe U.S. really focuses on moonshots, no pun intended. China is all about \u2018AI-plus,\u2019 or applied AI.\u201d She sums up the contrast in market terms: \u201cThe U.S. is technically more advanced, so they\u2019re selling Ferraris at the Ferrari price. But we sell Mercedes at the Toyota price. That\u2019s China\u2019s strength.\u201d<\/p>\n<p>As in the U.S., Chinese executives are anxious about falling behind. \u201cThey\u2019re very much afraid they\u2019ve not caught the wave,\u201d Liao says. \u201cThey want to embrace it.\u201d<\/p>\n<div>\n<div>\n<div><\/div>\n<\/div>\n<\/div>\n<p><em>Carol Liao will be speaking at the Fortune Leaders Forum, held in Macau on Sep. 8. Learn more here!<\/em><\/p>\n<p><em>In Fortune\u2019s \u201cAsia Agenda\u201d column, released twice a month, we speak with Asia\u2019s top business leaders about how they are building for the future and the lessons they\u2019ve drawn from leading companies in one of the world\u2019s fastest growing and most dynamic regions. Explore all of\u00a0our profiles here.<\/em><\/p>\n<p>Read more <a href=\"https:\/\/crosscountrymovingteams.com\/?p=4497\">California is banning \u2018sell-by\u2019 dates in grocery stores, but they\u2019re pretty much made up anyway<\/a><\/p>\n<div>\n<div><\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>From collapsing car sales to booming services and AI-linked manufacturing, China\u2019s growth engines are pulling in sharply different directions.<\/p>\n","protected":false},"author":1,"featured_media":4502,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[174],"tags":[],"class_list":["post-4503","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-asia-agenda"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Inside China\u2019s two-speed economy: Why goods consumption is slumping even as exports and services boom - Cross Country Moving Team<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/crosscountrymovingteams.com\/?p=4503\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Inside China\u2019s two-speed economy: Why goods consumption is slumping even as exports and services boom - Cross Country Moving Team\" \/>\n<meta property=\"og:description\" content=\"From collapsing car sales to booming services and AI-linked manufacturing, China\u2019s growth engines are pulling in sharply different directions.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/crosscountrymovingteams.com\/?p=4503\" \/>\n<meta property=\"og:site_name\" content=\"Cross Country Moving Team\" \/>\n<meta property=\"article:published_time\" content=\"2026-07-29T21:16:27+00:00\" \/>\n<meta name=\"author\" content=\"admin\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"admin\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"8 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/crosscountrymovingteams.com\\\/?p=4503#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/crosscountrymovingteams.com\\\/?p=4503\"},\"author\":{\"name\":\"admin\",\"@id\":\"https:\\\/\\\/crosscountrymovingteams.com\\\/#\\\/schema\\\/person\\\/1b8121bfb9a1c55d1fff3fca675fceaa\"},\"headline\":\"Inside China\u2019s two-speed economy: Why goods consumption is slumping even as exports and services boom\",\"datePublished\":\"2026-07-29T21:16:27+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/crosscountrymovingteams.com\\\/?p=4503\"},\"wordCount\":1555,\"commentCount\":0,\"image\":{\"@id\":\"https:\\\/\\\/crosscountrymovingteams.com\\\/?p=4503#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/crosscountrymovingteams.com\\\/wp-content\\\/uploads\\\/2026\\\/07\\\/3fab3a87430586a0cba126c7dfd67456.webp\",\"articleSection\":[\"Asia Agenda\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\\\/\\\/crosscountrymovingteams.com\\\/?p=4503#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/crosscountrymovingteams.com\\\/?p=4503\",\"url\":\"https:\\\/\\\/crosscountrymovingteams.com\\\/?p=4503\",\"name\":\"Inside China\u2019s two-speed economy: Why goods consumption is slumping even as exports and services boom - 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